How To Build Up Your Credit Rating

If you have just come out of college or university debt-free then you are extremely lucky. However, now that you want some credit you may find all paths blocked to you. Having no previous credit history makes it hard to borrow money. Although you cannot get a line of credit now, building a line of credit is easy. All you need to do is go through these easy to follow steps and you can quickly build yourself a good credit history:

Get a bank account

Although bank accounts do not appear on your credit report, having a bank account is the first step to building credit. Most credit card applications require you to list a bank account number, and having a bank account allows you to have a base from which to move money and pay bills.

Apply for a credit card

The next step is to apply for a credit card. Try and apply for a card that you are likely to be accepted for as being denied credit can harm your credit history. Store cards are often the best place to start. Despite their low limits and high-interest rates, you are more likely to be accepted for a card, which is ultimately what you want.

Make payments on time

Once you have a card, to build the credit you need to use it. Buy a few small items that you can easily afford each month on your card and then pay your balance on time each month. After about three months you should be able to apply for a better mainstream card such as Visa or MasterCard.

Budget

If you manage to get the card you want, make sure you budget your spending. Bad purchases and overspending can quickly undo the good credit history you have built. Remember that your credit is not an extra income but just another way to spend the money you already earn.

Make sure you can afford to pay back the amount you spend quickly because getting into debt will hurt your credit score. Try and pay more than the minimum each month to keep on top of your credit debt.

If you are denied ask for an explanation

If you are denied a credit line, then ask the lender why, as they are legally obliged to tell you. If you find out why you are being denied you can begin to correct this problem. Applying regularly for cards and being denied will harm your credit score, so its important to correct any problems that you have.

If you are patient and pay your bills on time, then you should be able to establish a good credit history in around 6 months to a year. Once you have established a credit line, make sure that you maintain your good credit score by being responsible with your money and only spending what you can afford. This will allow you to have ample credit in times of need.